Last evenings Symposium Dinner was a double-header first with an excellent presentation by Howard Fletcher whom Bob Skach sponsored for the dinner. Howard brought his extensive credentials in international business to bear in discussing the current economy from a big picture, 50,000 foot perspective. Detailed statistics backed up the main lesson, that our over leverage, over consumption, and under savings caused this “balance sheet” recession. Different from an “inventory” recession because it is caused by inflated values yet constant high debt levels, while the inventory recession is a simple temporary unbalance of supply and demand. The problem here is the lingering nature of the downturn and slow recovery, in this case exacerbated by government mistakes. (What’s new!) Again in this case given the multiple deficit levels, concomitant debt and horrendous unfunded liabilities at all government levels the future is dire short and near term. But Howard does forecast a start-stop recovery in the second half of the decade.
Our second speaker, Tom Cargill presented his provocative thoughts on the Fed’s anticipated exit from its unprecedented free money policy. This both in terms of zero interest rates and historic, dramatic expansion of money supply (M2). The $12 Trillion of deficits and debt was shockingly illustrated with Federal Reserve graphs. Tom made the point that the political pressure to keep the status quo will not abate. Next, the so-called “independence” of the Fed is ofttimes illusory in face of that pressure. Thus the only issue is the Fed’s political will to use its ample tools to start removing the punchbowl from the party.
After the presentations those in attendance undertook a lively exchange which was at times very telling, at least in the sense that each participant knew what the conclusions were. We face a dismal immediate future. Leaders from both parties tend to get bit by Potomac fever and avoid proper but hard decisions. There is a good chance of a revolution in the two upcoming election cycles as a strong majority of the electorate resent big government. The role of the government is the issue. Given agreement that it is too all-consuming, the question is how to effectively keep restricting and diminishing it.
I want to thank Howard and Tom for a thought provoking evening and great fodder for future discussions.